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Are taxes behind rise in exodus of rich French?

New figures have revealed a huge jump in the number of top earners leaving France for abroad. It begs the question whether high taxes might be to blame.

Are taxes behind rise in exodus of rich French?
Are taxes behind a rise in number of wealthy French people heading abroad? Photo: AFP
Actor Gérard Depardieu may have been the most high profile wealthy Frenchman to take his fortune abroad, but he's not the only one.
 
Indeed French film director Luc Besson announced this week that in future he would be paying his taxes in California rather than France.
 
The leaving of the likes of Depardieu has helped fuel the image that any French person worth a bit of money was packing their suitcase to escape the country's tax man – who shot to global fame in 2012 when François Hollande vowed to introduce a 75 percent levy on millionaires.
 
And new figures published by financial newspaper Les Echos, which came from the Ministry of Finance at Bercy, will only give ammunition to those on the right who accused the Socialist government of driving  the wealthy abroad.
 
In 2013 the number of French tax payers earning over €100,000 a year leaving for abroad rose by 40 percent, Les Echos says, with 3,744 individuals heading for the departure gates.
 
That compares to 2,674 in 2012, the year Hollande was elected and 1,330 in 2010.
 
And for the very, very rich who earn over €300,000 each year, the number of nationals quitting France rose by 46 percent from 451 in 2012 to 659 in 2013
 
Les Echos notes that while the exodus of high earners rose by 40 and 46 percent, the increase in the overall number of French going abroad rose by six percent.
 
Another recent study on the migration flows of the world's richest people by New World Health also spelled bad news for France. Over the period of 200 to 2014 France was ranked third in the world for the number of millionaires (42,000) who left the country.
 
The main question being asked in the French press on Friday was whether Hollande's notorious election promise to introduce a 75 percent tax rate could be to blame.
 
But the figures show that recent rise in the trend of wealthy French heading abroad began in 2011, when Hollande's predecessor Nicolas Sarkozy was still in charge.
 
 
But are they all fleeing from the French tax man?
 
When trying to explain the rise in departures Les Obs news site suggests the Sarkozy's policy of demanding more from those earning over €250,000, as well as Hollande's 75 percent tax on millionaires, may have both played a role as the high 45 percent tax bracket.
 
But add a little perspective only 0.3 percent of French citizens who are subject to special wealth tax that kicks in on fortunes over €1.3 million, are exiled abroad.
 
But most studies suggest the French are simply heading abroad for professional rather than tax reasons and that goes for the country's most wealthy too.
 
Speaking to The Local previously, Fabienne Petit director of international activities at French firm Humanis, which works with French expatriates in the area of health cover and insurance, explained it was a myth about wealthy French fleeing the tax man.
 
“It’s a real cliché to say that all French people are going abroad for only fiscal reasons. In fact only 17 percent of people leave for financial reasons, so we need to put an end to this myth,” Petit told The Local. 
 
Her view was backed up by a 2014 parliamentary report into French expats which stated that: “The fiscal motivation is rarely put forward as the first or most essential reason by those concerned”.
 
Nevertheless Les Echos notices that the number of French nationals departing for Portugal has tripled between 2010 and 2013, which is believed to be down to the Iberian country's fiscal advantages.
 
No figures were given for the number of wealthy French nationals returning home over the same time period, but from this year the French government intends to publish an annual report on all the comings and goings of its tax payers, which may shed more light on a phenomenon that continues to cause concern, given the loss of revenue to the French state.
 
 
 

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TAXES

Explained: France’s exit tax

Planning on leaving France? You may, depending on your circumstances, be charged the 'exit tax'.

Explained: France's exit tax

Like some other European countries, France does have an exit tax for those (French or foreign) who are leaving the country. It’s known by the English name l’Exit tax.

However, it won’t affect most people.

Only those who have been tax resident for a minimum six years of the 10 years immediately before they permanently move out of the country are liable to pay an exit tax – if, that is, they own property, titles or rights worth a minimum of €800,000, or that represent 50 percent of a company’s social profits.

If that affects you, the best advice is to seek expert individual financial advice before moving out of France for good. The relevant page on the French government’s impot.gouv.fr website says it is possible to defer payments, and some relief is available.

Because of the relatively high figures involved, this tax is irrelevant for most people. That said, however, you will still have to inform tax authorities that you are moving out of the country because you may still have income, property and capital gains taxes to pay.

Income tax

You must inform the tax office that you are moving and give them your new address so that your tax declarations can be transferred to your new address.

You are liable for tax on everything you earned in France prior to your departure as well as on any French earnings that are taxable in France under international tax treaties that you earned after your departure.

The year of your departure, you declare your previous year’s earnings as normal – declarations in spring 2024 are for earnings in 2023.

A year later, you will have to declare any earnings taxable in France from January 1st up to the date of your departure, and any French-sourced income taxable source until December 31st of the year of your departure.

If you continue to have any French-sourced income – such as from renting out a French property – you will have to declare that income annually, using the non-residents declaration form.

Property taxes

You will have property taxes to pay if you own a French property on January 1st of any given year – whether it is occupied or not. 

Property tax bills come out in the autumn, but they refer to the situation on January 1st of that year, so even if you sell your property you will usually have the pay a final property tax bill the following year.

Moreover, if you receive income from property in France or have rights related to that property (such as shared ownership or stock in property companies), as well as any additional revenue connected to the property, during the year you leave France, you will be required to pay taxes on these earnings.

If any property assets in France exceed €1.3 million on January 1st of a given year, you may also have to pay the wealth tax (IFI).

READ ALSO What is France’s wealth tax and who pays it?

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Capital gains tax 

If you sell your French property or share of a French property, you may be liable for capital gains tax at a rate of 19 percent. It will also be subject to social security contributions at the overall rate of 17.2 percent.

Capital gains tax varies depending on how long you have owned the property and whether it was a second home or your main residence.

READ ALSO How much capital gains tax will I have to pay if I sell my French property?

The good news is, if you move to another EU country, or any country that has a specific tax agreement with France, you may be exempt from capital gains tax for non-resident sellers on the sale of a property that was your principal residence in France.

If you move elsewhere, you may be able to claim exemption on capital gains tax up to €150,000. As always, you should seek expert financial advice.

Tell Social Security

Inform social security that you are leaving France permanently – and return your carte vitale if you have one. If you do not, you may be liable for any benefits you receive to which you are no longer entitled.

More mundane tasks involve informing utility and water companies, your internet provider, if you have one, the phone company, your insurance companies, banks – and La Poste, who will be able to forward your mail for up to 12 months, for a fee…

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